London remains one of the key global retail locations for luxury and technology brands despite a turbulent Q1 2018 for the UK retail market, according to the latest research by BNP Paribas Real Estate.
Despite a raft of administrations and current constrains on domestic spending, retail was the biggest beneficiary of tourist expenditure within London, accounting for 46.7% of total spend, rising to 63.2% when adding Food & Beverage figures (Mastercard Destination Cities Index, 2017). With beneficial exchange rates for international consumers, tourists continue to flock to London, which ranked as the second most visited city in the world, with 19.06m overnight visitors (Mastercard Destination Cities Index, 2017).
To access a slice of this international retail spending, luxury retailers continue to take space in central London, exemplified in the recent commitment of Alexander McQueen to a prime position at 27 Old Bond Street.
Despite on-going caution amongst retailers and a slight decline in occupational demand from mainstream operators over 2017 and Q1 2018, we have witnessed modest increases in prime rents in the Regent Street and Oxford Street submarkets, which now stand at £850psf and £1,100 psf respectively. Rental growth in the West End is set to be boosted further by the planned pedestrianisation of Oxford Street West Side, set to improve both the flow and volume of footfall and boost retail sales.
Alongside luxury retailers, it is tech brands who are making their mark in London’s West End, with Microsoft recently acquiring the former United Colours of Benetton Store at 253-259 Regent Street, set to become the tech giant’s first UK and third global store – a prime spot given that Regent Street and Oxford Street typically generate over half of the total West End annual spend. In November 2017, we saw American consumer electronics company Sonos take space at 21-23 Earlham Street, in the heart of Covent Garden’s Seven Dials.
Rob Hargreaves, Director in Central London Retail at BNP Paribas Real Estate said: “Microsoft’s commitment on Regent Street reinforces an on-going trend of tech brands expanding their physical store portfolios and opening flagship stores in the West End, with consumer demand driven by growing preferences for experiential and all things ‘tech’. Together with the ongoing appetite from international consumers for luxury products, London continues to lure some of the world’s most prestigious brands to its doorstep.”
Despite the expansionary ambitions of the tech sector, a number of more traditional retailers have been contracting in recognition of the growing share of online retail and the need to reduce surplus stores within physical portfolios. The IMRG Capgemini e-Retail Sales Index showed growth of online retail sales of 19.0% in March 2018, representing the strongest y-o-y growth since November 2016.
In a clear example, New Look recently opened a large site at 73-78 Oxford Street while also announcing plans to close 10.0% of their stores in an attempt to consolidate and reduce losses from less profitable stores.
Nick Robinson, Associate Director in Research at BNP Paribas Real Estate said: “Consolidation will continue to be a theme for the wider UK market in 2018, in part thanks to the growing share of online retail, however this is not expected to overly impact the West End, with luxury retailers unwilling to leave prime pitches in central London.
Download the Central London Retail Report from BNP Paribas Real Estate (Spring 2018)
